Pressure switch help

I noticed my water pressure was not as good as it used to be, and that when we used water, I did not hear the switch kick on as it once did, so I went out side and seen that the switch was staying closed, so I turned off the breaker, to see if the switch would kick out and reset its self. Well this is what happened, I hear water draining when I shut it off, so I went in and turned it back on, the switch was still closed, the water started to spit air, and mud, then with a loud pop in the house from the sink, it stoped, and I now have no water at all, the switch still has current, and is closed but not water?

talked to our well guy today, he said that the water is draining back into the well, because of hole in casing, and thats why the points were staying on, that we will be lucky if it did not burn up the pump. It don't think we have since today when I flicked the breaker on, I got air, and a stream of water less than a pen, he says with the hole in the casing the pump can't pump more than a pen size flow do to the casing lossing pressure and water out the hole